The Global X Video Games & Esports ETF (NASDAQ: HERO) debuted last month and despite that rookie status, it’s clear the new ETF is at the corner of some exciting trends.
The new HERO “seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality,” according to Global X.
Data confirm the esports market is booming and will continue to do so over the next several years.
“he eSports market is expected to grow rapidly in the following years. According to GoldenCasinoNews.com, from an estimated $865 million in 2018, eSports worldwide revenues are projected to increase to $1.79 billion in 2022, meaning it will double in the next three years,” reports Golden Casino News.
HERO’s underlying index features 38 stocks from nine countries. The bulk of the new ETF’s top 10 holdings are video game publishers, but the fund has exposure to hardware makers and semiconductor manufacturers, among other industries, as well.
Emphasizing Esports
Esports is a global phenomenon, a theme HERO is levered to because the fund allocates just 29.45% of its weight to U.S. Stocks.
“Compared by size, North America is the largest eSports market in the world, with 37 percent market share in 2019. During this year, it was projected that the eSports market in China would hold a 19 percent share of the entire market. South Korea will end 2019 with 6 percent eSports market share, while the rest of the world holds 38 percent of the eSports market,” according to Golden Casino.
While e-sports is garnering plenty of headlines and cloud gaming is a growth arena in its own right, investors should also consider a fund’s exposure to software makers, particularly those with robust brand recognition and product pipelines that feature franchises popular with gamers.
“According to 2019 data, the total eSports revenue in 2019 amounted to $ 1.1 billion, or 26.7 percent more than a year before,” notes Golden Casino. “The majority of the global eSports revenue comes from sponsorships, which generated $457 million in revenue in 2019, or 34.4 percent more compared to 2018 data. Esports media rights brought $251.3 million profit, advertising $189.2 million, while the merchandise and tickets generated $103.7 million in earnings.”
For more ETF launches, visit the New ETFs category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.